Rhinomed Limited Appendix 4E Preliminary Final Report

Transcription

1 Preliminary Final Report Year Ended (Previous corresponding year: 30 June 2017) ABN

2 Results for announcement to the market Revenue from ordinary activities 26.3% to 2,169,176 Loss after tax attributable to members 9.8% to (4,004,324) Net loss for the period attributable to members 9.8% to (4,004,324) Dividends No dividends have been paid or declared by the Group since the beginning of the current reporting period. No dividends were paid for the previous reporting period. The Company has no dividend reinvestment plan. 30 June 2017 Net tangible asset backing 1,450,289 1,653,842 Net tangible assets (cents per share)

3 1. Refer to note 5 for the change of the Company's structure during the period. 2. Other information required by Listing Rule 4.3A a. The remainder of the information requiring disclosure to comply with LIsting Rule 4.3A is contained in the attached Interim Report (which include the Directors Report). 3. Status of audit of accounts a. The accounts are currently in the process of being audited. An Annual Report for the year ended containing the Audit Report shall be provided in due course. 2

4 ABN Contents Results for announcement to the market 1 Directors Report 5 Directors 5 Review of operations 5 Operational commentary 6 Distribution 7 Key products 7 Regulatory status 8 Platform technology R&D 8 Corporate 8 Events after the reporting date 9 Financial position 9 Group structure 9 This interim financial report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 30 June 2017 and any public announcements made by during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act

5 Corporate directory Directors Mr Ron Dewhurst Non Executive Chairman Mr Michael Johnson, Chief Executive Officer and Managing Director Dr Eric Knight Non Executive Director Mr Brent Scrimshaw Non Executive Director Company Secretary Philip Hains Justyn Stedwell (resigned 1 November 2017) Principal Registered Office in Australia 97 Green Street, Cremorne, Vic 3121 Australia Share Register Auditor Automic Share Registry, Level 12, 575 Bourke Street, Melbourne Vic 3000 HLB Mann Judd, 575 Bourke St, Melbourne VIC 3000 Bankers National Australia Bank. Level 3/330 Collins Street, Melbourne Vic Stock Exchange Listings shares are listed on the Australian Stock Exchange market code: RNO 4

6 Directors Report Your Directors submit the preliminary financial statements of the consolidated entity for the full year ended 30 June The Consolidated Group includes and its subsidiaries as at period end 30 June The financial report has been prepared in accordance with Australian Accounting Standards. Directors The following persons held office as directors in during the financial period: Mr Ron Dewhurst Mr Michael Johnson Dr Eric Knight Mr Brent Scrimshaw Review of operations Rhinomed is seeking to radically improve the way millions of people around the world breathe, sleep, maintain their wellness and take medication. Our strategy is to commercialise our platform technology and ensure our products are accessible through the world s leading pharmacies, are endorsed and recommended by clinicians and that our platform is utilized by leading medical and pharmaceutical companies to improve the lives of people all around the world. Pleasingly, your directors can report that in FY18 the company made significant progress in achieving these outcomes. The following major milestones were achieved: The company generated strong revenue growth in each quarter of the financial year from the sales of its proprietary nasal technology and closed the year reporting 2,169,176 of revenues - up 26% on 2017 (1,717,225) 5

7 Net cash used in operating activities was 3.85m (up from 2.99m in FY17) reflecting a focus on strategic investment in revenue generation. The Group held cash reserves of 1,263,122 at, a decrease from 1,666,882 for the corresponding period end of 30 June The Group's net assets decreased slightly over the financial year to 4,766,912 at from 5,332,093 as at 30 June The net carrying value of the Group's intangible assets of 3,316,623 remains consistent with the previous period allowing for amortisation charges. Store count continues to grow significantly to approx. 7000* stores by the end of FY18. The Company shipped 229,654 units to customers throughout FY18, a 59% increase over FY17. Operational commentary In line with the Company's strategy, Mute continues to be a major area of growth for the Company. Nasal congestion, snoring and poor sleep continue to emerge as major contributors to poor health outcomes and chronic disease. The Company continues to believe that the unmet clinical need for a range of over-the-counter, non-drug, low cost, low invasive, well tolerated solutions is compelling. The Turbine brand, while not contributing materially to the company results, remains an integral part of the socialisation process of nasal technology. The company will continue to assess the fit for this technology within the global sport and exercise market. The Company delivered strong gross margins throughout FY18 and has maintained these during the sell-in process with major retailers. Sales and marketing costs for FY18 have been in line with expectations reflecting the cost of promotional campaigns to support new retail accounts and growth in brand awareness in these markets. This investment is vital to ensuring the Company meets store sell-through expectations in key markets. The Mute band continues to grow its awareness amongst both consumers and clinicians. Mute is increasingly being offered as a companion therapy by the rapidly growing sleep dentistry profession. Rhinomed exhibited at the American Dental Sleep Medicine conference and attended the American Sleep Medicine conference in June 2018 in Baltimore, USA. Dentists treating sleep disorders are increasingly utilising Mute to resolve nasal obstruction as it is an inexpensive, universally accessible, non-drug alternative. We are pleased to see Mute s inclusion in sleep dental education courses as this mode of therapy grows. The Company continues to believe that Mute can grow to be a major leader within the OTC retail pharmacy sleep and nasal congestion categories and a front line solution for sleep related breathing disorders. Staff numbers remained stable over the course of the year. The Company will continue to monitor corporate and overhead costs to ensure timely investment and appropriate levels of expenditure. 6

8 Distribution Over the course of this financial year the Company continued to build relationships with several important retailers and wholesalers globally. The company currently sells its technology through wholesalers, retail stores and clinics in the USA, Canada, the UK, Taiwan and Australia/New Zealand. This retail footprint is supplemented by an online presence on Amazon and other ecommerce sites. In the USA the company had established an initial relationship with Walgreens. This was expanded in FY18 from just over 0 stores to 4300 stores across the continental USA. These stores began stocking Mute technology in October Early in 2018 the company added Cardinal Health to its existing line up of US based wholesalers which includes McKesson s and AmerisourceBergen. These wholesalers play a critical role in ensuring the large number of US based independent pharmacies are able to access the company's Mute technology. The company continued to assess its Australian distribution which did not perform to expectations and has strategies in place to address this issue during FY19. In the last quarter of the financial year, and following strong sell through from the existing store footprint in the USA, the Company announced further expansion in the US. The Company received confirmation that leading drug store pharmacy chains CVS (1300 stores) and Rite Aid (3000+stores) would stock the Mute technology in FY19. Store count closed at the end of the financial year at approximately 7000* stores. The impact of these recent distribution announcements will result in a doubling of the US store count in FY19. *Stores numbers are estimated at the date of this report. Key products Our proprietary technology platform enables the development of multiple applications. The company has already commercialized two applications and is actively developing further application both internally and with a potential partners. Turbine and Mute are individually customisable nasal dilators that enhance nasal breathing and reduce congestion without placing pressure on the septum. Mute is designed to increase airflow and reduce snoring, thereby supporting sleep quality. Mute is light and flexible and can be worn comfortably during sleep. An independent in-home User Trial, peer-reviewed literature reviews and market research in the US, UK and Australia has assisted in developing an understanding of the scope of the global market opportunity for breathing technologies. Turbine is designed to make breathing easier during aerobic exercise and activity. Because retention in the nose during these activities is vital, Turbine employs more robust materials and retention features on the paddles and curved arms to hold the device in place during intense exercise. 7

9 Regulatory status Mute and Turbine are registered as a Class 1 product with regulatory authorities in several key markets - in Australia with the TGA, in the USA with the FDA, in Europe where it has received a CE Mark, in Canada with Canada Health and in Taiwan with the Taiwanese FDA. Platform technology R&D The company has created a compelling platform technology capable of meeting a number of clear unmet clinical and consumer health needs. This platform is protected by patents both granted and pending across multiple jurisdictions. To prove out the value of this platform the company began assessing a range of opportunities where nasal drug delivery resolves significant issues encountered by other delivery methods. As part of the demonstration of the utility of the platform the company continues the development of its nasal decongestant and sleep management products. Prototyping has been finalised and the next stage of assessing retailer demand is underway. Further updates will be provided during the first half of FY19. Late in 2017 the company began a dialogue with the US s largest medical cannabis operator Columbia Care. In June 2018 both parties announced the completion and signing of a non-binding term sheet. Rhinomed and Columbia Care are now working to finalise a definitive agreement that will define the relationship going forward. The company expects this will in time result in the development of a portfolio of products utilising the company s proprietary nasal technology to deliver cannabis formulations. The company believes that this relationship will unlock a number of significant opportunities in the USA - the fast growing medical cannabis market in the world. Rhinomed continues to build a reputation and to be recognised as an innovator and global leader in improving nasal airflow, breathing and sleep. R&D expenditure remains conservative as the Company leverages the existing technology infrastructure. R&D investment during FY18 was 142k. Corporate As outlined in the FY18 Q4 quarterly statement, the 2.0m working capital facility was rolled over. This facility was not utilised during the current financial year. In November 2017, the Company raised 3.6m which was strongly supported by both existing and new investors from both the US, the UK and Australia. The company has 117 million shares on issue and the top 20 shareholders held 61.5% of the company's stock as at June 30,

10 Events after the reporting date No other matter or circumstance has arisen since 30 June 2017 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. Financial position The Group held cash reserves of 1,263,122 at (2017: 1,666,883), a decrease of 403,761 from the previous period end. The Group s net assets were 4,766,912 compared with 5,332,093 for the previous year. The net carrying value of the Group s intangible assets was 3,316,623 compared with 3,678,251 for the previous year. The Group recorded a total comprehensive loss for the period of 3,996,593 after tax reflecting the continuing investment in positioning the technology at the forefront of the sleep market. Group structure In line with the company s strategy, on the 16th August 2017, the following dormant fully owned subsidiaries within the Group were de-registered: Helicon (Asia) Pty Ltd Helicon (China) Pty Ltd Helicon (Korea) Pty Ltd Helicon International Pty Ltd (Formerly Helicon International Limited) Leading Edge Instruments Pty Ltd (Formerly Leading Edge Instruments Limited) Vibrovein Pty Ltd 9

11 Consolidated statement of profit or loss and other comprehensive income For the year ended Consolidated entity Note Revenues Revenue from continuing operations 2 2,169,176 1,717,225 Other income 2 90, ,045 Expenses Raw materials and consumables used 3 (607,447) (388,309) Employee benefits expense (1,503,486) (2,198,595) Depreciation and amortisation 3 (372,103) (470,228) Administration (1,458,003) (1,399,803) Marketing (1,750,937) (1,510,672) Research and development (142,296) (64,546) Other expenses (504,839) (542,639) Loss before income tax (4,079,747) (4,721,522) Income tax benefit 4 75, ,944 Loss for the year (4,004,324) (4,441,578) Other comprehensive loss Exchange differences on translation of foreign operations 7(b) 7,731 (4,961) Total comprehensive loss for the year (3,996,593) (4,446,539) Total comprehensive loss for the year is attributable to: Non-controlling interests - - Owners of (3,996,593) (4,446,539) Cents Cents Loss per share for loss from continuing operations attributable to the ordinary equity holders of the Company: Basic earnings per share 1 16 (3.74) (6.61) Diluted earnings per share 16 (3.74) (6.61) 1. On 3 May 2017 the share capital of the Company has been consolidated through the conversion to one share for every ten shares. 10

12 Consolidated statement of financial position As at ASSETS Consolidated entity Note Current assets Cash and cash equivalents 5(a) 1,263,122 1,666,883 Trade and other receivables 5(b) 838, ,900 Inventories 5(c) 359, ,118 Other assets 54,202 78,032 Total current assets 2,514,538 2,549,933 Non-current assets Other financial assets 52,170 51,475 Property, plant and equipment 25,253 23,926 Intangible assets 3(a) 3,316,623 3,678,251 Total non-current assets 3,394,046 3,753,652 Total assets 5,908,584 6,303,585 LIABILITIES Current liabilities Trade and other payables 5(e) 696, ,588 Provisions 53, ,632 Deferred revenue 6(b) 371, ,652 Total current liabilities 1,120, ,872 Non-current liabilities Provisions 6(b) 20,879 7,620 Total non-current liabilities 20,879 7,620 Total liabilities 1,141, ,492 Net assets 4,766,912 5,332,093 EQUITY Issued capital 4(a) 54,366,251 50,934,839 Reserves 4(b) 802, ,104 Non-controlling interest reserve 7(b) - (6,158,687) Accumulated losses 7(c) (50,402,174) (40,239,163) Total equity 4,766,912 5,332,093 11

13 Consolidated statement of changes in equity For the year ended Note Issued capital Option reserve Reserves NCI Foreign exchange reserve Accumulated losses Total equity Balance at 1 July ,919,157 3,629,618 (6,158,687) (24,024) (39,250,694) 7,115,370 Loss for the year (4,441,578) (4,441,578) Other comprehensive (income) /expense for the year (4,961) - (4,961) Total comprehensive loss for the year (4,961) (4,441,578) (4,446,539) Transactions with equity holders in their capacity as equity holders: Shares issued net of issue costs 2,015, ,015,682 Options expired - (3,453,109) - - 3,453,109 - Options issued - 647, ,580 2,015,682 (2,805,529) - - 3,453,109 2,663,262 Balance at 30 June ,934, ,089 (6,158,687) (28,985) (40,239,163) 5,332,093 Foreign Option Reserves exchange Accumulated Total Note Issued capital reserve NCI reserve losses equity Balance at 1 July ,934, ,089 (6,158,687) (28,985) (40,239,163) 5,332,093 Loss for the year (4,004,324) (4,004,324) Other comprehensive (income) /expense for the year ,731-7,731 Total comprehensive loss for the year ,731 (4,004,324) (3,996,593) Transactions with equity holders in their capacity as equity holders: Transfer to accumulated losses - - 6,158,687 - (6,158,687) - Shares issued net of issue costs 3,431, ,431,412 3,431,412-6,158,687 - (6,158,687) 3,431,412 Balance at 54,366, ,089 - (21,254) (50,402,174) 4,766,912 12

14 Consolidated statement of cash flows For the year ended Cash flows from operating activities Consolidated entity Note Receipts from customers 1,768,552 2,024,000 Payments to suppliers and employees (5,758,478) (5,432,071) Interest received 15,000 35,000 Interest and other costs of finance paid (18,000) (14,000) Receipt of R&D tax refund 75, ,860 Government grants 72, ,955 Net cash outflow from operating activities 8(a) (3,845,344) (2,996,256) Cash flows from investing activities Payments for purchase of property, plant and equipment (11,802) (4,714) Withdrawal/(investment) from/(in) term deposits - 51,510 Net cash (outflow) inflow from investing activities (11,802) 46,796 Cash flows from financing activities Proceeds from issues of shares and other equity securities 4(a) 3,605,125 2,198,440 Capital raising costs (173,713) (182,758) Net cash inflow from financing activities 3,431,412 2,015,682 Net (decrease) in cash and cash equivalents (425,734) (933,778) Cash and cash equivalents at the beginning of the year 1,666,883 2,612,757 Effects of exchange rate changes on cash and cash equivalents 21,973 (12,096) Cash and cash equivalents at end of year 1,263,122 1,666,883 13

15 Note to the consolidated financial statements 1 Segment information The Group has operated in one segment, being the identification, acquisition and commercialisation of late stage therapeutic delivery technologies. The segment details are therefore fully reflected in the body of the financial report. 2 Revenue Revenue Consolidated entity Sale of goods 2,169,176 1,717,225 Other income Interest received 13,063 25,090 Other items 4,966 - Export grants 72, , , ,045 Total revenue and other income 2,259,364 1,853,270 Treatment of revenues under current trading terms. Management has reviewed the accounting practices with respect to the recognition of deferred revenue. Previously, in instances when the Company was entitled to raise an invoice prior to the risks of ownership transferring from the Company to the customer, a receivable had been recognised against a corresponding deferred revenue liability. Management has moved to more closely align the treatment of Revenues to the new Australian Accounting Standards (AASB 15) and the proposed changes to these standards that will occur in the future. As a result the company has elected to offset these amounts. This change in accounting treatment does not have an impact on revenue recognition. Whilst the change in treatment involved a reduction in current assets and current liabilities, there was no change to current assets net of current liabilities. Management has previously reported on the deferred revenue liability balance as a means of demonstrating the dollar value of stock distributed to customer stores. To continue this practice, debtors representing unearned revenue are still presented in the receivables note, however, the corresponding unearned revenue is now deducted within the receivables note. The unearned revenue now recognised in the balance sheet reflects cash received prior to the transfer of the risks of ownership. Under the current treatment for unearned revenue, the combined deferred revenue and unearned invoices raised is growing significantly reflecting the new retail relationships being developed and the significant underlying growth attributable to the growing retail footprint. 14

16 Note to the consolidated financial statements (continued) 3 Non-financial assets and liabilities (a) Intangible assets Consolidated entity Goodwill At cost 4,951,996 4,951,996 Less: impairment (3,386,992) (3,386,992) Net carrying value 1,565,004 1,565,004 Development costs At cost 602, ,503 Less: impairment (213,576) (213,576) Less: amortisation (165,624) (134,936) Net carrying value 223, ,991 Intellectual property At cost 9,516,217 9,516,217 Less: impairment (6,492,957) (6,492,957) Less: amortisation (1,494,944) (1,164,004) Net carrying value 1,528,316 1,859,256 Total intangible assets 3,316,623 3,678,251 15

17 Note to the consolidated financial statements (continued) 3 Non-financial assets and liabilities (continued) (a) Intangible assets (continued) (i) Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Goodwill Development costs Intellectual property Balance at 30 June ,565, ,679 2,190,196 4,039,879 Amortisation charge - (30,688) (330,940) (361,628) Balance at 30 June ,565, ,991 1,859,256 3,678,251 Amortisation charge - (30,688) (330,940) (361,628) Balance at 1,565, ,303 1,528,316 3,316,623 4 Equity (a) Issued capital Total (i) Movements in ordinary shares on issue: Details Number of shares Balance at 1 July ,234,007 48,919,157 14/03/2017 Private placement at ,135,000 1,892,430 20/03/2017 Private placement at ,000, ,000 21/03/2017 Private placement at ,000,000 72,000 23/03/2017 Private placement at /05/2017 Share consolidation* (936,369,107) - 03/05/2017 Share consolidation* 93,637,159 - Less: transaction costs arising on share issue - (182,758) Balance at 30 June ,637,159 50,934,839 Balance at 1 July ,637,159 50,934,839 05/12/2017 Private placement at ,271, ,692 08/12/2017 Private placement at ,129,613 2,719,433 21/03/2018 Private placement at ,334 95,000 Less: transaction costs arising on share issue - (173,713) Balance at 117,671,387 54,366,251 * On 3 May 2017 the share capital of the Company has been consolidated through the conversion to one share for every ten shares. 16

18 Note to the consolidated financial statements (continued) 4 Equity (continued) (b) Reserves Consolidated entity Other reserves 824, ,089 Foreign exchange reserve (21,254) (28,985) (i) Reconciliations 802, ,104 Foreign Option reserve NCI reserve exchange reserve Total Balance at 1 July ,629,618 (6,158,687) (24,024) (2,553,093) Share-based payments Options issued/(expired) (2,805,529) - - (2,805,529) Foreign exchange movements - - (4,961) (4,961) Balance at 30 June ,089 (6,158,687) (28,985) (5,363,583) Balance at 1 July ,089 (6,158,687) (28,985) (5,363,583) Share-based payments Options issued/(expired) Foreign exchange movements - - 7,731 7,731 Transfer to accumulated losses - 6,158,687-6,158,687 Balance at 824,089 - (21,254) 802,835 The option reserve is used to record the expense associated with the valuation of options. The NCI reserve is used to record adjustments arising from transactions with non-controlling interests. The foreign exchange reserve is used to record exchange differences arising on translation of a foreign controlled subsidiary. 17

19 Note to the consolidated financial statements (continued) 4 Equity (continued) (b) Reserves (continued) (ii) Movements in options No. Balance at 1 July ,919,230 3,629,618 Options lapsed/expired (243,150,000) (3,453,109) Consolidation 10:1 (25,892,307) - Options issued 6,150, ,580 Balance at 30 June ,026, ,089 No. Balance at 1 July ,026, ,089 Options lapsed/expired - - Options issued - - Balance at 9,026, ,089 There were no new options granted or issued during the current reporting period. 5 Subsidiaries The consolidated financial statements include the financial statements of the Group and the following subsidiaries: Subsidiary Country of incorporation 2018 % Helicon (Asia) Pty Ltd Australia - Helicon (China) Pty Ltd Australia - Helicon (Korea) Pty Ltd Australia - Helicon International Limited Australia - Leading Edge Instruments Pty Ltd (LEI) Australia - Breathing Space Health Pty Ltd Australia 2017 % Vibrovein Pty Ltd ASAP Breatheassist Pty Ltd Rhinomed UK Limited* Breatheassist Limited Rhinomed Inc. Australia Australia United Kingdom United Kingdom United States - * formally known as Consegna Management Services Limited. All shares held in subsidiaries represent ordinary shares and the voting rights are equal to the ownership percentage. There are no significant restrictions over the Group s ability to access or use assets and settle liabilities of the Group. 18

20 Note to the consolidated financial statements (continued) 5 Subsidiaries (continued) On 16 August 2017, the following dormant fully owned subsidiaries within the Group were de-registered: Helicon (Asia) Pty Ltd Helicon (China) Pty Ltd Helicon (Korea) Pty Ltd Helicon International Pty Ltd (Formerly Helicon International Limited) Leading Edge Instruments Pty Ltd (Formerly Leading Edge Instruments Limited) Vibrovein Pty Ltd As a result of the above deregistrations, an amount of 6,158,687 previously attributable to noncontrolling interest was transferred to accumulated losses from NCI reserve. 6 Events occurring after the reporting period No matter or circumstance has arisen since that has significantly affected, or may significantly affect the Group s operations, the results of those operations, or the Group s state of affairs in future financial years. 19